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krishnaart: management fees in private equity
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| From: smilehair (Original message) |
Sent: 19/07/2025 12:12 |
management fees in private equity compensate GPs for fund operations, typically 1.5–2% of committed capital annually. During the 5–6 year investment period, fees are calculated on total commitments; during harvest, they shift to net invested capital or decline (e.g., 1.5% → 1%). Fees cover salaries, due diligence, and administrative costs but are scrutinized for “fee creep” (e.g., charging fees on exited investments). LPs increasingly demand fee breaks—such as recycling provisions (reinvested capital exempt) or offsets (transaction fees reducing management fees). Mega-funds (>$10B) may negotiate lower fees (1–1.5%), while emerging managers justify higher fees with niche strategies. |
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